Mario Draghi's speech: what the analysts say

Spanish borrowing costs rise and stock markets fall - with the Madrid bourse
dropping sharply - after ECB president Mario Draghi said the bank may act
independently in markets but announced no specific measures. Here is what
some top analysts said.

'Traders and investors who expected immediate action are, and should be, disappointed. More scolding of governments, but no ECB action, is the bottom line'Photo: AP

2:52PM BST 02 Aug 2012

Lindsey Piegza, economist, FTN Financial

Following on the heels of his 'anything it takes' comments, the ECB's Mario Draghi reinforced his intentions to coordinate with other governments to buy sovereign debt. However this redundant battle cry was ultimately disappointing as investors were looking for a more decisive plan of action amid continued and reiterated opposition from Germany's Bundesbank to bond-buying programs.

Julian Callow, Barclays Capital

We interpret this as a clear sign that the ECB is prepared to change policy significantly at its September meeting, in terms of purchasing debt without claiming seniority subject to the EFSF being deployed to buy government debt. Overall this is in line with our expectation; it still will depend on whether Spain and Italy (which have a summit now proceeding) will call upon the EFSF to do this.

Note that the phrase, 'may undertake outright open market operations of a size adequate to meet its objective', is a new one from the ECB: it suggests that it is preparing to undertake large scale asset purchases to bring down yields in southern Europe and without claiming seniority.

That said, the context of Mr Draghi's comments suggest that the activation of such measures may need to be linked together with a decision by the eurogroup to use the EFSF and ESM for bond market purchases of debt in southern Europe.

Annalisa Piazza, Newedge Strategy

Although the ECB's Draghi gives some hints on the possible details of future non-standard measures, the tone of his answers during the Q&A session seems to suggest that no agreement has been found among policymakers.

Draghi clearly said that the Buba doesn't agree on further bond purchases.

As such, we suspect there will be a big deal of negotiation in the coming weeks in order to find a way to revive the bond purchases, with conditions that make the Germans happy.

Draghi says various non-standard measures will be reviewed and sees a list of options.. The market clearly doesn't like the uncertain scenario as policymakers seem to be borrowing more and more time while last week's comments suggested that a "done deal" could have been presented today.

Some details on the possible additional non-standard measures, which make them different from the SMP. Draghi said that the market operations will be transparent, with details on the amount and countries. In addition, market operations will be focused on the short end of the curves.

Carl Weinberg, chief economist, High Frequency Economics

Once again, we have no commitment to action from the ECB, and no execution of promises previously made. Nothing seems set to happen now.

Traders and investors who expected immediate action are, and should be, disappointed. More scolding of governments, but no ECB action, is the bottom line.

If the ECB does act, President Draghi said intervention in the bond market will be at the short end of the yield curve. Prices of long-term Spanish and Italian bonds would not be supported; yields traded up after this comment.

Purchases may be sterilized, or they may not be sterilized. This is yet to be determined. Clearly, the action plan is still lacking details.

'I'm really surprised at the amount of attention my remarks last week received in the press,' Draghi said. Translation: I cannot deliver the promises I implied in my London speech last week...you must have misunderstood me.

Charles Diebel, head of market strategy, Lloyds

All of the announcements, if transferred into actual activity would be close to the 'big bazooka' approach that the markets are looking for, but it requires the governments concerned to ask for help. I think the sceptical take from the markets is understandable but I would caution that Draghi is likely to follow through with actual actions.

But, its conditional on the governments following through as well. The fact that actions may be unsterilised is no small statement and likewise the 'firepower' argument is left unresolved. Market disappointment is hardly surprising in this context but we may well find this lays the ground work for the 'grand plan' in coming weeks.

Ioan Smith, strategist, Knight Capital

It seems to be quite disappointing, as I would have expected, but the majority of the market were expecting a lot more. There is a lack of any action so he has basically passed the buck back on to politicians. He hasn't come up with anything that the majority in the market had hoped for, so I guess the market would be disappointed by this.

Richard McGuire, rate strategist, Rabobank

Draghi announces ECB may undertake outright open market operations 'of an adequate size' (i.e. SMP) and that concerns over seniority will be addressed. Non-standard measures will also be considered.

However, no action is in the offing over the immediate term with the Bank pledging to 'design modalities' for such measures in the coming weeks. He also emphasises the need for strict conditionality when engaging EFSF/ESM support. So nothing for now with a promise of the SMP in the coming weeks but with this looking to be an compliment to rather than a substitution for EFSF assistance.